Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

During the period from 2011 through 2015 the annual returns on small U.S. stocks were - 3.40 percent, 19.00 percent, 45.65 percent, 3.23 percent, and

During the period from 2011 through 2015 the annual returns on small U.S. stocks were - 3.40 percent, 19.00 percent, 45.65 percent, 3.23 percent, and - 3.80 percent, respectively. What would a $1 investment, made at the beginning of 2011, have been worth at the end of 2015? (Round answer to 3 decimal places, e.g. 52.750.)

Value in 2015-?

2. Sandra recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent if the economy slips into a recession. If the probabilities of the healthy, soft, and recessionary states are 0.5, 0.4, and 0.1, respectively, then what are the expected return and the standard deviation of the return on Sandras investment? (Round answers to 3 decimal places, e.g. 0.125 and round intermediate calculations to 5 decimal places, e.g. 0.07680.)

Standard deviation?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Public Finance

Authors: Toshihiro Ihori

1st Edition

9811023883, 978-9811023880

More Books

Students also viewed these Finance questions

Question

How might James's behavior affect him in the future?

Answered: 1 week ago

Question

Are assessments of candidate attractiveness relevant? Discuss.

Answered: 1 week ago